Retail apocalypse, who? Commercial real estate's retail sector is
undoubtedly reinventing itself, but that doesn’t mean brick and mortar retail
is going extinct. On the contrary, more and more brands are announcing big
plans to open up physical store locations.
The latest is Levi’s, who plans to open
hundreds of stores by the time 2019 comes to a close.
Let’s explore what this means to retail as a
whole.
Why
Turn to Physical Retail?
If you’re listening to CRE retail news, you
know that the value of brick and mortar stores is a hot debate. So why in the
world would Levi’s choose this as their next big move?
It’s all apart of the popular clothing brand’s
strategy to reconfigure the way they’re doing business. Recently, their
wholesale profits are on the decline as the department store concept is
struggling to keep above water.
However, the company is thriving in other
areas. Direct-to-consumer performance is up 7% as Levi’s remains a popular household
brand for US patrons. Levi’s reports that their e-commerce sector is thriving
and their sales at full-price stores are also strong.
Experimenting
with Small Footprint Stores
As the entire industry is struggling to find
the solution to the issues plaguing contemporary retail, Levi’s might be onto
something.
The company has plans for its 100 new stores.
Levi’s is looking to test out the small footprint store and see how it competes
with their other outlets. Levi’s CEO Chip Bergh states:
"Growing
our U.S. direct-to-consumer business allows us to move toward premiumizing the
marketplace, and remains one of our important strategies to offset headwinds in
U.S. wholesale by continuing to reduce our concentration in that channel."
By testing out the waters as with
brand-centric storefronts, Levi’s is establishing themselves as an independent
luxury clothier. Stepping away from discount stores and department stores, the
company wants to see if consumers will be open to paying full price at a small
Levi’s locations.
They are switching up their target audience
from the discount shopper to the boutique browser, hoping to capitalize on the
in-store experience that can only be achieved in physical retail.
How
Will This Impact Other Areas of Business?
After looking at the factors motivating Levi’s
to open up physical locations, what about their online presence?
By opening up new stores that their consumers
can visit in person, Levi’s is adding a whole new layer of consumer experience
to their business. These stores will help boost brand awareness and can
strengthen their online presence through engagements, events, and promotions.
Levi’s will also be able to jump on the BOPIS
train, which has been boosting both physical and online sales for the past
year. Giving consumers the option to integrate their online and in-person
shopping experiences inevitably drives traffic to their sites and store
locations. This convenience-based strategy benefits both platforms - it’s a
double win.
Making
Connections
Using Levi’s as a module to gauge the retail
industry, we can see that today’s business is all about playing it smart.
Ultimately, the companies who are actively responding to their data metrics and
aligning their strategies with what consumers want are the ones who will survive
retail’s changing tides.
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